From: Group 5 –
Date: March 24, 2015
Re: Best Buy in Crisis Case Analysis
Our research shows that Best Buy has slowly been losing market share to both discounters and online retailers. CEO Brad Anderson addressed this trend saying, “rapid, seismic changes in consumer behavior created the most difficult climate we've ever seen,” causing operating profits to fall regardless of sales growth. After performing an extensive external and internal analysis of Best Buy, we have determined the strategic adjustments necessary to insure Best Buy’s survival as the largest consumer electronic retailer.
The analysis of Best Buy’s competitive strategy and financial analysis illustrates the company’s four growth stages. The original Best Buy superstore featured discounted brand-name merchandise, central service and warehouse distribution and later evolved into a “grab-and-go” store format. Later, acquisitions of and investments in companies like Magnolia, Geek Squad, Future Stores and Musicland, and the transition into online retailing was its attempt to reignite growth after a few quarterly losses. Furthermore, Best Buy decided to focus on its relationships with its customers rather than open new locations to maintain sales, also known as customer centricity. To improve both profitability and growth potential, Best Buy has since shifted the focus of its business strategy from broad cost leadership to a hybrid of cost leadership and focused differentiation.
We recommend Best Buy invest in Best Buy U, a customer oriented online shopping assistance with live, online sales representatives, and online tutorials. With this, Best Buy remains consistent with its strategy and core competencies, enhances growth potential, and remains consistent with market trends. The detailed analysis and explanations that justify the aforementioned conclusions follow.
Environmental Analysis: GDPEST
Technological gap between developing and developed nations around the world. Expanding globally has the potential to fail in many less developed and demanding markets.
The technology industry has a large and consistent demand in developed countries, so as a retailer Best Buy has a great opportunity to expand and dominate in such markets.
Baby-Boomers do not purchase technology frequently, and therefore do not require a large consumer retailer such as Best Buy.
Baby-Boomers may come to Best Buy with any technological questions using the company’s services more than its products. Millennials on the other hand are very focused on and interested in technology and follow its developments.
Changing tax laws, product and business regulations may restrict the company’s performance and scope.
Government initiatives and technological investments promote the manufacture of the products Best Buy sells.
Recession and slowing economies change consumer behavior and demand for cheaper substitutes.
Economic growth on the other hand promotes consumer spending and consumption of luxury goods. Also consumers are willing to pay a premium for a product or service.
Brand favoritism and creating a positive shopping experience has become a focus for consumers.
Best Buy offers products from a wide range of respectable brands with a loyal customer base. They can strategically market the experience of shopping at a Best Buy store and using its services.
Online retailing is constantly changing and improving. Consumers no longer have to purchase products in store or acquire information about the products from the salespeople.
Consumer demand is consistent or increases as new technology emerges.
Porter’s Five Forces model shows the level competition within the industry. In the industry, the threat to new entrants is low. There are high barriers to entry because big box electronic stores are